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Wednesday, June 6, 2018

The county grand jury says San Diego is not properly managing its corporate marketing partnerships, making it impossible to determine the success of a program that city officials say has generated $27 million since 1999.

In a report released on Monday, the civic watchdog panel recommends the city keep more accurate records, maintain them for longer and distinguish revenue from other contributions by businesses, such as providing equipment.

The report, based on a recent 21-page audit of the program by county officials, also says city workers making such deals should receive contract training and that businesses proposing partnerships should identify potential conflicts of interest.

City spokeswoman Katie Keach said Monday by email that city officials plan to provide a formal response to the grand jury report that will clarify how the city’s existing policies help ensure the continued success of the program.

Launched nearly two decades ago, San Diego’s corporate partnership program has been called a model for generating revenue from marketing opportunities most cities don’t realize they have.

The city’s highest profile partnership has been with Toyota, which provides all of the city’s 34 lifeguard vehicles in exchange for promoting them as Toyota vehicles and some special marketing events organized by the city.

The deal, which the city renewed in 2016, has an estimated $1 million annual value because the city avoids the expense of buying lifeguard vehicles.

The grand jury, however, says the city should distinguish between that type of financial benefit and actual cash received by the city, such as a recent five-year deal with California Coast Credit Union that provides $650,000 in cash.

And because the city has made so many different types of deals with so many corporate partners, the grand jury says it was unable to determine whether all of the agreements under the program have been identified.

City officials have also failed to comply with a requirement to issue a summary of all ongoing marketing deals four times per year, the report says.

Other factors making it difficult to determine how much the program has generated include city officials sometimes estimating the revenue generated by some partnerships instead of providing hard numbers and the city lacking a process for determining the “net benefit” of some deals.

Another hurdle, the report says, is the city classifying partnership agreements as routine administrative files that can be destroyed after five years, even though some of the corporate deals have lasted longer than that.

On conflicts of interest, the report says requests for partnership proposals issued by the city should start requiring businesses to identify such potential conflicts, which is a standard practice in other city contracting.

“The lack of a requirement for disclosure increases the risk that an agreement could create a conflict of interest, or the appearance of one,” the report says.

In addition to Toyota and the credit union, the city’s ongoing partnerships include snack vendor Canteen, Discover Bike, Sharp HealthCare, Cardiac Science and Service Line Warranties.

The city also made a deal connected to the U.S. Open returning to Torrey Pines municipal golf course in 2021.

Turfstar is providing San Diego $7.5 million in cash and other contributions over 12 years, in exchange for the city agreeing to exclusively lease all mowers and other golf maintenance equipment from Turfstar.

Previous city partnerships have included deals with Sprint, Rainbow Vending, Car2Go and Zipcar.

Mayor Kevin Faulconer and the City Council must formally respond to the report, including each of its recommendations, by Sept. 3.